Pension Funds Insider

Pension Funds Insider brings the latest pensions news and industry insights; from investment and governance updates to new mandate appointments and pensions regulatory information.

Auto-enrolment contributions should rise

31 March 2017

Image for Auto-enrolment contributions should rise

The amount people contribute to workplace pensions through automatic enrolment should increase in line with the increase in state pension age, according to the director of policy at Now Pensions.

Adrian Boulding said an increase in contributions would bridge the gap between early retirement and state pension age – and called for the issue to be addressed in the 2017 review of automatic enrolment.

He said: "The increase in auto-enrolment contributions past 8% is something we've lobbied for for a while and we firmly believe it needs to be addressed."

Boulding's comments follow an independent government review of the state pension age by John Cridland.

The Cridland review proposes that it should increase from 67 to 68 by 2039, seven years earlier than currently planned.

The government is due to make a decision by May and ministers are under pressure to address the expected in rise in the cost of pensions due to longer life expectancy and a greater number of people being of pension age.

Boulding said a rise in pension contributions has an essential role to play in making retirement, particularly early retirement, a viable option.

He said: "If people are going to use their auto-enrolment pension pots to bridge the gap between early retirement and the state pension age, then they are going to have to pay more into them first."

Now Pensions says its research found that although people want to retire early, some think it won't be an option.

The company says almost half of UK adults (48%) who have not yet retired, want to retire by the time they are 61, and of these, 69% want to finish work while they are still able to make the most of their time.

"While obviously life expectancy is increasing and people can look forward to a long retirement, our research shows people would like to be able to retire while they are still healthy," said Boulding.

"People are realising that what they want and what they can afford are two different things."

First published 30.03.2017

Lindsay.sharman@wilmingtonplc.com